The repo rate has been raised from 5.25% to 5.50% following a unanimous decision by the Monetary Policy Committee (MPC).
The RBI raised the benchmark rate amid concerns over rising inflation, higher oil prices and pressure on the Indian rupee.
Addressing the MPC's decision, RBI Governor Sanjay Malhotra said, "Global inflation is expected to rise. Trade uncertainty continues to linger. Global sentiment remains fragile. The impact of the Iran war could also disrupt trade and supply chains."
"Rate cuts are off the table in the near term," he added.
The RBI's decision comes against the backdrop of heightened global economic uncertainty, with geopolitical tensions and elevated energy prices posing risks to inflation and economic stability.
The rate hike is expected to increase borrowing costs for consumers and businesses, while the central bank's tighter monetary stance signals a greater focus on containing inflation.
The MPC's unanimous decision also indicates the central bank's concern over emerging inflationary pressures and the need to closely monitor the evolving domestic and global economic environment.
The RBI's move will be closely watched by borrowers, financial markets and businesses for its impact on loan rates, investment and overall economic activity.